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Bitcoins are being tokenized at a rapid rate for use on the Ethereum blockchain. Just ten days back, BTC supply’s on the world’s largest smart contract development platform was 73,000. Now that number has hit 100,000. Consequentially, the valuation of Bitcoin’s supply on Ethereum has topped $1 billion.
Bitcoin Supply On Ethereum Tops 100,000
As per data from Dune Analytics, a free Ethereum analytics provider, the tokenized bitcoin number on the second-largest blockchain network has hit the 100,000 mark. This corresponds to ~0.5 percent of the total BTC supply. As a result, bitcoin on Ethereum supply valuation has topped $1 billion.
Wrapped BTC (WBTC) and RenBTC rule the Bitcoin market on Ethereum with token circulations clocking almost 70,000 and 20,000, respectively.
This represents a 1684 percent appreciation in just three months since Elias Simos first launched the Bitcoin on Ethereum dashboard on the Dune platform.
As reported by CryptoPotato on September 8, the supply of tokenized bitcoin on Ethereum stood at almost 73,000. In just ten days, the figure has grown 36 percent.
This demonstrates the fact that BTC investors who are bored by the top crypto asset’s recent lackluster price action are putting their holdings to use to get in on the animated DeFi market action.
How Is It Happening?
Users are employing two main ways to tokenized their Bitcoin holdings on Ethereum – custodial and non-custodial. Through the custodial process, BTC holders send some or all of their bitcoins to a centralized custodian. And receive an equivalent amount of tokenized BTC in return.
The other solution involves a decentralized escrow feature, where a smart contract accepts the original bitcoin collateral and mints the corresponding numbers of tokenized BTC coins. The escrow keeps the funds locked until the user retrieves them back in return for their deposited bitcoins.
In the first method, there’s a risk of misappropriation of funds by the centralized party, and the second one might cause users to lose their BTC by courtesy of human errors during transactions.
Ethereum Is Becoming The Leading Layer 2 Solution for BTC
Despite the presence of well-discussed layer two solutions for Bitcoin like the Lightning Network and Liquid Network, Ethereum is rising in prominence as the dominant off-chain transactional layer for BTC.
Will this benefit Ethereum? Let’s say if a lot of bitcoins (read tokenized versions of BTC) are transacting on the public blockchain network, then that could increase the utility of Ethereum as a global network for value transfer.
Also, as per a blog post by cryptocurrency exchange Binance, the DeFi ecosystem could itself greatly benefit from the rapid proliferation of Bitcoin on Ethereum.
There could be decentralized financial services based on tokenized bitcoin. BTC-based DEXes, lending marketplaces, liquidity pools, and whatever else exists in DeFi could all be denominated in BTC. The success of tokenized bitcoin could also encourage other types of assets to migrate to the Ethereum network.
Most of the projects are still in very early stages, and the technology behind them has a lot of room to improve. Still, there are certainly exciting developments to come on this front, the blog read.